-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A5PslIQV8LH/5aJZNwecKLZGhe8qGTtEozFb0BOj/XrPD2HUPh9me3eHgV4239rp DeVxsvjdsnRZwBpKvNWUyw== 0000067472-00-000004.txt : 20000515 0000067472-00-000004.hdr.sgml : 20000515 ACCESSION NUMBER: 0000067472-00-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOLEX INC CENTRAL INDEX KEY: 0000067472 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 362369491 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07491 FILM NUMBER: 627304 BUSINESS ADDRESS: STREET 1: 2222 WELLINGTON CT CITY: LISLE STATE: IL ZIP: 60532 BUSINESS PHONE: 6305274253 MAIL ADDRESS: STREET 1: 2222 WELLINGTON COURT CITY: LISLE STATE: IL ZIP: 60532 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Commission File Number 0-7491 MOLEX INCORPORATED (Exact name of registrant as specified in its charter) Delaware 36-2369491 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2222 Wellington Court, Lisle, Illinois 60532 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 630-969-4550 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (applicable only to corporate registrants). At March 31, 2000 as restated for the January 2000 stock dividend: Common Stock 98,332,872 shares Class A Common Stock 97,744,623 shares Class B Common Stock 94,255 shares MOLEX INCORPORATED FORM 10-Q MARCH 31, 2000 INDEX Page ---- PART I - FINANCIAL INFORMATION Item 1. Financial Information - Unaudited Condensed Consolidated Balance Sheets -- 2 March 31, 2000 and June 30, 1999 Condensed Consolidated Statements of Income -- 3 Three and Nine Months Ended March 31, 2000 and 1999 Condensed Consolidated Statements of Cash Flows -- 4 Nine Months Ended March 31, 2000 and 1999 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosure About Market Risk 10 PART II - OTHER INFORMATION 11 -1- MOLEX INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - In Thousands)
ASSETS Mar. 31, June 30, 2000 1999 _________ _________ CURRENT ASSETS: Cash and cash equivalents $ 163,439 $ 182,992 Marketable securities 46,153 83,874 Accounts receivable - net 486,258 391,120 Inventories 244,194 188,861 Other current assets 26,365 34,491 Total current assets 966,409 881,338 PROPERTY, PLANT AND EQUIPMENT - NET 941,091 809,602 GOODWILL 165,686 137,378 OTHER ASSETS 209,978 73,694 $2,283,164 $1,902,012 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 231,728 $ 156,556 Accrued expenses 145,359 130,969 Other current liabilities 29,622 54,916 Total current liabilities 406,709 342,441 DEFERRED ITEMS 3,068 6,968 ACCRUED POSTRETIREMENT BENEFITS 40,810 30,706 LONG-TERM DEBT 22,584 20,148 MINORITY INTEREST 2,323 1,212 SHAREHOLDERS' EQUITY Common stock 8,441 8,415 Paid-in capital 241,119 233,806 Retained earnings 1,636,203 1,491,337 Treasury stock (226,856) (193,317) Deferred unearned compensation (19,204) (21,996) Cumulative translation and other adjustments 167,967 (17,708) Total shareholders' equity 1,807,670 1,500,537 $2,283,164 $1,902,012
The accompanying notes are an integral part of these condensed consolidated financial statements. - 2 - MOLEX INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited - In Thousands Except per Share Data)
THREE MONTHS ENDED NINE MONTHS ENDED Mar. 31, Mar. 31, Mar. 31, Mar. 31, 2000 1999 2000 1999 NET REVENUE $567,569 $426,178 $1,602,448 $1,265,788 COST OF SALES 346,432 252,504 978,433 749,941 Gross Profit 221,137 173,674 624,015 515,847 OPERATING EXPENSES: Selling 43,023 34,771 122,608 104,035 Administrative 97,091 75,328 279,985 227,003 Total Operating Expenses 140,114 110,099 402,593 331,038 Income from Operations 81,023 63,575 221,422 184,809 OTHER INCOME: Foreign currency transaction gain/(loss) 1,600 (1,562) (37) (4,217) Interest income, net 1,396 1,958 5,443 6,780 Total Other Income 2,996 396 5,406 2,563 INCOME BEFORE INCOME TAXES 84,019 63,971 226,828 187,372 INCOME TAXES 26,224 19,011 69,418 59,366 NET INCOME $ 57,795 $ 44,960 $ 157,410 $ 128,006 EARNINGS PER COMMON SHARE: BASIC $0.29 $0.23 $0.80 $0.66 DILUTED $0.29 $0.23 $0.79 $0.65 CASH DIVIDENDS PER COMMON SHARE $0.025 $0.012 $0.065 $0.036 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING DURING THE PERIOD: BASIC 196,044 193,771 196,157 194,228 DILUTED 198,463 195,008 198,175 195,520
The accompanying notes are an integral part of these condensed consolidated financial statements. - 3 - MOLEX INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - In Thousands)
NINE MONTHS ENDED Mar. 31, Mar. 31, 2000 1999 CASH AND CASH EQUIVALENTS, Beginning of Period $182,992 $205,262 CASH AND CASH EQUIVALENTS PROVIDED FROM (USED FOR): Operations: Net income 157,410 128,006 Add (deduct) non-cash items included in net income: Depreciation and amortization 141,143 117,579 Amortization of deferred unearned compensation 3,254 5,329 Other charges to net income 596 162 Current items: Accounts receivable (82,970) (20,747) Inventories (50,017) (9,972) Other current assets 6,122 (4,643) Accounts payable 64,878 (15,777) Accrued expenses 21,408 710 Other current liabilities (29,192) (20,957) NET CASH PROVIDED FROM OPERATIONS 232,632 179,690 Investments: Purchases of property, plant and equipment (244,691) (157,861) Proceeds from sale of property, plant and equipment 7,130 1,916 Proceeds from sale of marketable securities 3,568,467 3,975,107 Purchases of marketable securities (3,530,746)(3,961,563) Increase in other assets (16,278) (43,023) NET CASH USED FOR INVESTMENTS (216,118) (185,424) Financing: Increase in long-term debt 4,457 4,401 Decrease in long-term debt (2,021) - Cash dividends paid (10,194) (6,932) Purchase of treasury stock (34,216) (39,284) Reissuance of treasury stock 2,460 1,855 Exercise of stock options 3,998 3,755 NET CASH USED FOR FINANCING (35,516) (36,205) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (551) 42,179 CASH AND CASH EQUIVALENTS, End of Period $163,439 $205,502
The accompanying notes are an integral part of these condensed consolidated financial statements. - 4 - MOLEX INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) Condensed Consolidated Financial Statements The condensed consolidated financial statements have been prepared from the Company's books and records without audit and are subject to year-end adjustments. The interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of information for the interim periods presented. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Molex Incorporated 1999 Annual Report to Shareholders and the 1999 Annual Report on Form 10-K. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. (2) Earnings per Common Share On January 28, 2000 the Board of Directors of Molex Incorporated declared a twenty-five percent (25%) stock dividend. The dividend was payable on March 6, 2000 to shareholders of record on February 14, 2000. One quarter (1/4) share of Common Stock was paid for each share of Common Stock and each share of Class B Common Stock outstanding, and one quarter (1/4) share of Class A Common Stock was paid for each share of Class A Common Stock outstanding. All shares outstanding, earnings and dividends have been retroactively restated for the stock split effected in the form of a stock dividend. The reconciliation of common shares outstanding to dilutive common shares outstanding is as follows as restated for the January 2000 stock dividend:
Three Months Ended Nine Months Ended March 31, March 31, 2000 1999 2000 1999 Weighted average shares outstanding - basic 196,044 193,771 196,157 194,228 Dilutive effect of stock options 2,419 1,237 2,018 1,292 Weighted average shares outstanding - diluted 198,463 195,008 198,175 195,520
-5- (3) Comprehensive Income Comprehensive income includes all non-shareowner changes in equity and consists of net income, foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities. Total comprehensive income, in thousands of dollars, is as follows:
Three Months Ended Nine Months Ended March 31, March 31, 2000 1999 2000 1999 Net income $ 57,795 $44,960 $157,410 $128,006 Currency translation and other adjustments 56,681 (38,956) 185,675 39,507 Total comprehensive income $114,476 $ 6,004 $343,085 $167,513
4) Inventories Inventories are valued at the lower of first-in, first-out cost or market. Inventories, in thousands of dollars, consist of the following: Mar. 31, June 30, 2000 1999 Raw Materials $ 40,295 $ 46,767 Work in Process 98,312 58,893 Finished Goods 105,587 83,201 $244,194 $188,861 (5) New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." Originally effective for all fiscal quarters of all fiscal years beginning after June 15, 1999, it has since been delayed one year. It establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company is assessing the impact this statement will have on its statement of financial position and the results of its operations. -6- MOLEX INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Consolidated net revenues for the third fiscal quarter ended March 31, 2000 were $567.6 million, increasing 33.2 percent in US dollars and 32.6 percent in local currencies over the prior year period. For the nine months ended March 31, 2000, net revenues rose to $1,602.4 million from $1,265.8 million in the corresponding period last year, resulting in US dollar growth of 26.6 percent and local currency growth of 24.8 percent. Excluding revenues of the Cardell acquisition, growth for the current quarter and year-to-date periods would have been 27.0 percent and 20.2 percent, respectively. The strengthening of other currencies against the US dollar caused net revenues to increase $2.3 million and $22.4 million for the quarter and year-to-date periods, respectively. Management believes that Molex continues to grow at a rate higher than the worldwide connector market. All geographic regions experienced sales growth for the quarter as well as the nine months ended March 31, 2000. In the Americas, net revenue grew 38.0 percent in both US dollars and local currencies over the prior year quarter. Year-to-date net revenue growth was 33.8 percent in US dollars and local currencies compared with last year. Excluding the sales of the Cardell acquisition, net revenue rose 24.0 percent and 18.7 percent for the quarter and year-to-date periods, respectively. Growth in the region was a result of strong demand in all major markets, including business through distributors. Net revenue in the Far East North rose 46.0 percent in US dollars and 32.2 percent in local currencies compared with the prior year quarter. For the nine months ended March 31, 2000, revenue grew 38.7 percent in US dollars and 20.8 percent in local currencies over last year. In both Japan and Korea, increasing investment in new products is contributing to market share gains, especially in the fast growing computer, consumer and telecom markets. Far East South net revenue for the quarter increased 15.2 percent in US dollars and 13.4 percent in local currencies over the prior year. For the year-to-date period, revenue rose 12.2 percent in US dollars and 10.7 percent in local currencies over last year due to increased demand in the personal computer and computer-peripheral product markets. In Europe, net revenue grew 25.6 percent in US dollars and 42.9 percent in local currencies over the prior year quarter. For the nine months ended March 31, 2000, the revenue growth over the comparable prior year period was 10.2 percent in US dollars and 23.1 percent in local currencies. Strength in -7- the telecommunications and fiber optic markets contributed to the growth. For the nine months ended March 31, 2000, 61.8 percent of Molex's worldwide net revenue was generated from its international operations. International operations are subject to currency fluctuations and government actions. Molex monitors its currency exposure in each country and continues to implement strategies to respond to changing economic environments. Due to the uncertainty of the foreign exchange markets, Molex cannot reasonably predict future trends related to foreign currency fluctuations. Foreign currency fluctuations have impacted results in the past and may impact results in the future. Gross profit as a percent of net revenue was 39.0 percent for the quarter ended March 31, 2000 compared with 40.8 percent last year. For the nine months ended March 31, 2000, the gross profit percentage was 38.9 percent, down from 40.8 percent in the prior year period. This year's margins were impacted by inclusion of the results of the Cardell division, which currently has a lower gross profit margin than the overall Molex gross margin, and higher operating costs incurred to meet customer demands. Selling and administrative expenses were $140.1 million and $402.6 million, respectively, for the quarter and nine month period ended March 31, 2000 as compared with $110.1 million and $331.0 million, respectively, for the corresponding prior year periods. As a percent of net revenue, selling and administrative expenses for the quarter were 24.7 percent compared with 25.8 percent in the prior year, and for the year-to-date periods were 25.1 percent compared with 26.2 percent in the prior year. Also included in selling and administrative expenses are research and development expenditures, which remained steady as a percent of net revenue at 6.1 percent for both nine month periods ended March 31, 2000 and 1999. Interest income, net of interest expense, was $1.4 million in the quarter ended March 31, 2000 compared with $2.0 million in the prior year and was $5.4 million for the nine months ended March 31, 2000 as compared with $6.8 million a year ago. The year-to-date decline is primarily due to a lower level of short-term investments than in the prior year as well as an increased level of debt. The effective income tax rate was 31.0 percent for the quarter ended March 31, 2000 compared with 30.0 percent in the prior year period and was 30.4 percent for the nine month period compared with 31.7 percent last year. The year-to-date reduction was caused by the Company's continued repatriation strategy, tax rate reductions in some of the jurisdictions in which the Company operates, and the ongoing global effort to reduce its income tax burden through better planning. Net income for the quarter was $57.8 million or 29 cents per basic and diluted -8- share, a 28.5 percent increase compared with $45.0 million or 23 cents per basic and diluted share for the same quarter last fiscal year. Net income for the nine months ended March 31, 2000 was $157.4 million or 80 cents per basic and 79 cents per diluted share, as compared with net income of $128.0 million or 66 cents per basic and 65 cents per diluted share, for the same period in the prior year. Excluding the effects of currency translation, net income increased 25.8 percent for the quarter and 18.9 percent for the nine months ended March 31, 2000 from the comparable prior year periods. LIQUIDITY AND CAPITAL RESOURCES Molex's balance sheet continues to be exceptionally strong. Working capital at March 31, 2000 was $559.7 million, an increase from $538.9 million at June 30, 1999. During the nine months ended March 31, 2000, the Company purchased an aggregate of 1,187,500 shares of treasury stock at an aggregate cost of $34.2 million. This is in accordance with authorization by the Board of Directors allowing for the purchase of up to $50 million of Company stock during the current fiscal year. Management believes that the Company's current liquidity and financial flexibility are adequate to support its continued growth. OUTLOOK The outlook for the remainder of fiscal 2000 is positive, based on improved business levels to date, good momentum and a very strong backlog. Due to the uncertainty of the foreign currency exchange markets, Molex cannot reasonably predict future trends related to foreign currency fluctuations. Foreign currency fluctuations have impacted the Company's results in the past and may impact results in the future. To further expand the Company's global presence, offer innovative products at an accelerated pace, and improve internal productivity, Molex plans to invest approximately $271 million in capital expenditures and approximately $129 million in research and development for the fiscal year ending June 30, 2000. Management believes the Company is well positioned to continue growing faster than the overall connector industry. The Company continues to emphasize expansion in rapidly growing industry segments, product lines and geographic regions. Molex remains committed to providing high quality products and a full range of services to its customers worldwide. -9- FORWARD LOOKING STATEMENT This document contains various forward looking statements. Statements that are not historical are forward looking statements and are subject to various risks and uncertainties which could cause actual results to vary materially from those stated. Such risks and uncertainties include: economic conditions in various regions, product and price competition, raw material prices, foreign currency exchange rates, technology changes, patent issues, litigation results, legal and regulatory developments, and other risks and uncertainties described in documents filed with the Securities and Exchange Commission. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to market risk associated with changes in foreign currency exchange rates, interest rates and certain commodity prices. The Company mitigates its foreign currency exchange rate risk principally through the establishment of local production facilities in the markets it serves and invoicing of customers in the same currency as the source of the products. Molex also monitors its foreign currency exposure in each country and implements strategies to respond to changing economic and political environments. Examples of these strategies include the prompt payment of intercompany balances utilizing a global netting system, the establishing of contra-currency accounts in several international subsidiaries, development of natural hedges and occasional use of foreign exchange contracts. A formalized treasury risk management policy has been implemented by the Company which describes the procedures and controls over derivative financial and commodity instruments. Under the policy, the Company does not use derivative financial or commodity instruments for trading purposes and the use of such instruments are subject to strict approval levels by senior officers. Typically, the use of such derivative instruments is limited to hedging activities related to specific foreign currency cash flows. The Company's exposure related to such transactions is, in the aggregate, not material to the Company's financial position, results of operations and cash flows. Interest rate exposure is principally limited to the $46.2 million of marketable securities owned by the Company. Such securities are debt instruments which generate interest income for the Company on temporary excess cash balances. The Company does not actively manage the risk of interest rate fluctuations, however, such risk is mitigated by the relatively short term, less than twelve months, nature of these investments. -10- Part II - Other Information Items 1-4. Not Applicable Item 5. Other Information On March 20, 2000, Molex acquired substantially all of the assets and assumed certain liabilities of the Beau Interconnect Division of Axsys Technologies. Beau is a leading manufacturer of electronic interconnect devices in many industrial and commercial markets. Item 6. Not Applicable -11- S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MOLEX INCORPORATED -------------------- (Registrant) Date May 12, 2000 /s/ ROBERT B. MAHONEY ----------------- -------------------- Robert B. Mahoney Corporate Vice President, Treasurer and Chief Financial Officer Date May 12, 2000 /s/ LOUIS A. HECHT ----------------- -------------------- Louis A. Hecht Corporate Secretary and General Counsel -12- EX-27 2
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